Two truths and a lie? Egypt's government says subsidy cuts will not affect fuel prices

Egyptian government plans to cut spending on energy subsidies by diversifying its sources of energy to ease pressure on subsidised fuels.

Revising state subsidies[2] does not entail an increase in the consumer prices of petrol products, Minister of Petroleum Sherif Ismail said in a press conference on Tuesday.

Egypt's Ministry of Petroleum is currently revising a long-established subsidy system[3] for petroleum products which currently costs the government LE128 billion a year.

Egypt's Ministry of Petroleum is currently revising a long-established subsidy system for petroleum products which currently costs the government LE128 billion a year.

The Egyptian government plans to cut spending on energy subsidies by diversifying its sources of energy to ease the pressure on subsidised fuels like diesel, gasoline, and low quality fuel oil mazut, rather than hiking up the prices of petrol products outright, petroleum ministry spokesperson Hamdi Abdel-Aziz told Ahram Online.

The minister mentioned using coal to generate electricity rather than diesel and mazut as at present, as a possible solution.

Speaking at the Ninth Money and Finance Conference in Cairo on Monday, Finance Minister Ahmed Galal said that the government was preparing a plan to gradually reduce state subsidies on fuel in the coming years. Galal said he expects it to be implemented before the end of the interim period, which is slated to conclude by spring 2014.

"As it is, 80 percent of energy subsidies do not benefit those in need," explained Galal, who stressed that the amount was "double the spending on education and four times the spending on health."

Last year, Mohamed Morsi's government announced an intention to cut fuel spending to LE70 billion for the 2012/2013 fiscal year, compared to LE95 billion the previous year. The real figure ended up surpassing LE120 billion.

Fuel price hikes imposed by President Omar Al-Bashir's government in neighbouring Sudan last week have sparked major unrest, with dozens of protesters reportedly killed.

Mubarak's regime launched a plan to gradually cut energy subsidies in 2004 but has to suspend it after the 2008 global economic crisis.